Precursors and consequences of youth poverty in Germany

Abstract

We examine time trends, precursors and continuity of poverty during youth and young adulthood in Germany. Although Germany’s labour market performed well during the recent economic crisis, this occurred against the backdrop of growing social inequality and strong increase in the risk of poverty, especially among youth and young adults. Based on data from the German Socio-Economic Panel Study, we propose a method to take into account inter-generational support by virtually pooling the income of residentially independent children and their parents. We show that poverty risks are differentially related to the “big five” transitions to adulthood. Leaving the parental home and entering unemployment strongly increase poverty risks, whereas cohabitation and employment in the higher labour market segments are strong protectors against poverty. The transition to parenthood, educational participation and precarious employment are not consistently related to poverty risk once inter-generational support is taken into account. While enrollment at university has a positive impact on poverty when residentially independent children are considered economically independent, this effect disappears with adjustment for parental resources. Whereas the impact of youth transitions does not change over time, social background has a strong and increasing impact on poverty risks. Social background and poverty experiences during youth strongly affect poverty risks later in life, although life course continuity weakens through the period of youth transitions. Overall, these results clearly point towards the increasing importance of social background and inequality in affecting the risk of poverty during the transition to adulthood.